Avoid Oracle ULA Termination Risks

Many software publishers recognize that perpetual licenses should be, true to their name, perpetual, and that unless you violate the terms of the licenses they should remain in effect forever. As the licensee, you may not want to use that Microsoft Office 97 license you purchased fifteen years ago. However, if it suits your needs and is compatible with your hardware, you are good to go, even if you might have violated the terms of some other agreement with Microsoft during that 15-year period. Most publishers, like Microsoft, typically separate the terms of paid perpetual licenses from the terms of unrelated purchasing or services agreements.

Oracle is not one of those software publishers. Consequently, Oracle’s Unlimited License Agreement (ULA) carries special risks.

The ULA is structured as an ordering document attached to an Oracle Master Agreement (OMA) (or, depending on when you first started doing business with Oracle, to an Oracle License and Services Agreement (OLSA) or a Software Licenses and Services Agreement (SLSA)). The current OMA states in part:

You agree that if you are in default under the Master Agreement, You may not use those Products or Service Offerings ordered.”

That is broad language that gives Oracle a very big hammer to wield in the event, for example, that an audit reveals unlicensed usage of Oracle products. It gives Oracle the ability not only to cut off a business from making future purchases, but also to reach back in time and extinguish license grants that may have been negotiated a decade ago. Under any licensing model that is problematic, but under an ULA it can be catastrophic.

The ULA typically requires a business at the outset to identify all licenses previously purchased for covered products, and those licenses then are terminated in favor of the ULA’s unlimited license grant. The problem is that, once “converted” in that way, those licenses live and die as a unit – if there is a breach then Oracle can extinguish the entire estate. Under a different purchasing model, that might still be a problem, given the above language in the OMA. However, even if a licensee previously negotiated a revision to that language preventing Oracle from terminating paid, perpetual, un-breached licenses, an ULA could make that language moot by terminating the licenses to which it previously pertained.

IT and procurement teams must work very closely and diligently with legal teams to identify these and other risks associated with the ULA structure.